Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Inbound Routing from an Affiliated Exchange, 63969-63971 [2011-26528]
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Notices
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of
10 a.m. and 3 p.m. Copies of the filing
also will be available for inspection and
copying at the Exchange’s principal
office, and on its Web site at https://
www.nyse.com. The text of the proposed
rule change is available on the
Commission’s Web site at https://
www.sec.gov. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
All submissions should refer to File
Number SR–NYSEAmex–2011–76 and
should be submitted on or before
November 4, 2011.
ACTION:
Notice; correction.
The Securities and Exchange
Commission published in the Federal
Register of August 2, 2011 a Notice of
Filing of Amendment No. 1 to Proposed
Rule Change to Adopt FINRA Rule 2231
(Customer Account Statements) in the
Consolidated FINRA Rulebook
(‘‘Notice’’). The Notice contained
incorrect information regarding the
timing for Commission action.
FOR FURTHER INFORMATION CONTACT:
Alicia Goldin, Division of Trading and
Markets, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549, (202) 551–5618.
SUMMARY:
Correction
In the Federal Register of August 2,
2011, in FR Doc. 2011–19420, on page
46346, the text beginning at the 8th line
of the 2nd column, under the heading
‘‘Section III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action,’’ is corrected to
read as follows:
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
As the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Elizabeth M. Murphy,
Secretary.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–26512 Filed 10–13–11; 8:45 am]
BILLING CODE 8011–01–P
[FR Doc. 2011–26526 Filed 10–13–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65514; File No. SR–BX–
2011–066]
tkelley on DSK3SPTVN1PROD with NOTICES
[Release No. 34–64969A; File No. SR–
FINRA–2009–028]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Amendment No. 1 to Proposed Rule
Change To Adopt FINRA Rule 2231
(Customer Account Statements) in the
Consolidated FINRA Rulebook;
Correction
October 7, 2011.
Securities and Exchange
Commission.
AGENCY:
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Inbound Routing from an Affiliated
Exchange
October 7, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on
1 15
24 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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September 30, 2011, NASDAQ OMX
BX, Inc. (‘‘Exchange’’ or ‘‘BX’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
BX is filing with the Commission a
proposed rule change to permit it to
accept inbound orders routed by Nasdaq
Execution Services LLC (‘‘NES’’) from
the NASDAQ OMX PSX facility (‘‘PSX’’)
of NASDAQ OMX PHLX (‘‘PHLX’’)
(with the attendant obligations and
conditions), as described further below,
on a one year pilot basis.
The text of the proposed rule change
is available at https://
nasdaqomxbx.cchwallstreet.com/, at
BX’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In conjunction with a proposal by
PHLX to provide outbound routing
services to all markets using its
affiliated routing broker, NES,3 the
Exchange proposes that NES be
permitted to route orders from PSX to
the Exchange on a one year pilot basis.
NES is a broker-dealer and member of
NASDAQ, PHLX and the Exchange. NES
provides all routing functions for The
NASDAQ Stock Market (‘‘NASDAQ’’) as
well as, pursuant to recent proposed
rule changes, BX and PHLX.4 The
3 See
4 See
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SR–Phlx–2011–108.
SR–BX–2011–048 and SR–Phlx–2011–108.
14OCN1
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
Exchange, NASDAQ, PHLX and NES are
affiliates. Accordingly, the affiliate
relationship between BX and NES, its
member, raises the issue of an
exchange’s affiliation with a member of
such exchange. Specifically, in
connection with prior filings, the
Commission has expressed concern that
the affiliation of an exchange with one
of its members raises the potential for
unfair competitive advantage and
potential conflicts of interest between
an exchange’s self-regulatory obligations
and its commercial interests.5
Recognizing that the Commission has
previously expressed concern regarding
the potential for conflicts of interest in
instances where a member firm is
affiliated with an exchange of which it
is a member, the Exchange previously
proposed, and the Commission
approved, limitations and conditions on
NES’s affiliation with the Exchange.6
Also recognizing that the Commission
has expressed concern regarding the
potential for conflicts of interest in
instances where a member firm is
affiliated with an exchange to which it
is routing orders, the Exchange
previously proposed, and the
Commission approved,7 NES’s
affiliation with the Exchange to permit
the Exchange to accept inbound orders
that NES routes in its capacity as a
facility of Nasdaq, subject to the certain
limitations and conditions. The
Exchange now proposes to permit BX to
accept inbound orders that NES routes
in its capacity as a facility of PHLX,
subject to these same limitations and
conditions:
First, the Exchange and the Financial
Industry Regulatory Authority
(‘‘FINRA’’) will maintain a Regulatory
Contract, as well as an agreement
pursuant to Rule 17d–2 under the Act
(‘‘17d–2 Agreement’’).8 Pursuant to the
Regulatory Contract and the 17d–2
Agreement, FINRA will be allocated
regulatory responsibilities to review
NES’s compliance with certain
Exchange rules.9 Pursuant to the
Regulatory Contract, however, BX
5 See Securities Exchange Act Release Nos. 59153
(December 23, 2008), 73 FR 80485 (SR–NASDAQ–
2008–098); and 62736 (August 17, 2010), 75 FR
51861 (August 23, 2010) (SR–NASDAQ–2010–100).
6 See Securities Exchange Act Release Nos. 58324,
73 FR 4936 (August 12, 2008) (SR–BSE–2008–02;
SR–BSE–2008–23; SR–BSE–2008–25; SR–BSECC–
2008–01; (‘‘BSE Approval Order’’).
7 See Securities Exchange Act Release Nos. 59154
(December 23, 2008), 73 FR 80468 (December 31,
2008) (SR–BSE–2008–048); and 64090 (March 17,
2011), 76 FR 16462 (SR–BX–2011–007).
8 17 CFR 240.17d–2.
9 NES is also subject to independent oversight by
FINRA, its designated examiniing authority, for
compliance with financial responsibility
requirements.
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retains ultimate responsibility for
enforcing its rules with respect to NES.
Second, FINRA will monitor NES for
compliance with the Exchange’s trading
rules, and will collect and maintain
certain related information.10
Third, FINRA will provide a report to
the Exchange’s chief regulatory officer
(‘‘CRO’’), on a quarterly basis, that: (i)
Quantifies all alerts (of which FINRA is
aware) that identify NES as a participant
that has potentially violated
Commission or Exchange rules, and (ii)
lists all investigations that identify NES
as a participant that has potentially
violated Commission or Exchange rules.
Fourth, the Exchange has in place BX
Rule 2140(c), which requires NASDAQ
OMX, as the holding company owning
both the Exchange and NES, to establish
and maintain procedures and internal
controls reasonably designed to ensure
that NES does not develop or implement
changes to its system, based on nonpublic information obtained regarding
planned changes to the Exchange’s
systems as a result of its affiliation with
the Exchange, until such information is
available generally to similarly situated
Exchange members, in connection with
the provision of inbound order routing
to the Exchange.
Fifth, the Exchange proposes that the
routing of orders from NES to the
Exchange, in NES’s capacity as a facility
of PHLX, be authorized for a pilot
period of one year.
The Exchange believes that the abovelisted conditions protect the
independence of the Exchange’s
regulatory responsibility with respect to
NES, and that these mitigate the
aforementioned concerns about
potential conflicts of interest and unfair
competitive advantage.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,11
in general, and with Sections 6(b)(5) of
the Act,12 in particular, in that the
proposal is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
10 Pursuant ot the Regulatory Contract, both
FINRA and the Exchange will collect and maintain
all alerts, complaints, investigations and
enforcement actions in which NES (in its capacity
as a facility of PHLX routing orders to the
Exchange) is identified as a participant that has
potentially violated applciable Commission or
Exchange rules. The Exchange and FINRA will
retain these records in an easily accessible manner
in order to facilitate any potential review conducted
by the Commission’s Office of Compliance
Inspections and Examinations.
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b)(5).
PO 00000
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and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest,
because the proposed rule change will
allow the Exchange to receive inbound
routes of orders from NES, acting in its
capacity as a facility of PHLX, in a
manner consistent with prior approvals
and established protections. The
Exchange believes that the proposed
conditions establish mechanisms that
protect the independence of the
Exchange’s regulatory responsibility
with respect to NES, as well as ensure
that NES cannot use any information it
may have because of its affiliation with
the Exchange to its advantage.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
BX does not believe that the proposed
rule change will impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 13 and Rule 19b–4(f)(6) 14
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
14 17
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Federal Register / Vol. 76, No. 199 / Friday, October 14, 2011 / Notices
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BX–2011–066 on the
subject line.
2011–066 and should be submitted on
or before November 4, 2011.
of the most significant parts of such
statements.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Elizabeth M. Murphy,
Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2011–26528 Filed 10–13–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65518; File No. SR–CBOE–
2011–096]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the Fees
Schedule
October 7, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
• Send paper comments in triplicate
‘‘Act’’),1 and Rule 19b–4 thereunder,2
to Elizabeth M. Murphy, Secretary,
notice is hereby given that on October
Securities and Exchange Commission,
3, 2011, the Chicago Board Options
100 F Street, NE., Washington, DC
Exchange, Incorporated (the ‘‘Exchange’’
20549–1090.
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
All submissions should refer to File
‘‘Commission’’) the proposed rule
Number SR–BX–2011–066. This file
change as described in Items I, II, and
number should be included on the
subject line if e-mail is used. To help the III below, which Items have been
prepared by the Exchange. The
Commission process and review your
Commission is publishing this notice to
comments more efficiently, please use
only one method. The Commission will solicit comments on the proposed rule
post all comments on the Commission’s change from interested persons.
Internet Web site (https://www.sec.gov/
I. Self-Regulatory Organization’s
rules/sro.shtml). Copies of the
Statement of the Terms of the Substance
submission, all subsequent
of the Proposed Rule Change
amendments, all written statements
The Exchange proposes to amend its
with respect to the proposed rule
Fees Schedule. The text of the proposed
change that are filed with the
rule change is available on the
Commission, and all written
Exchange’s Web site (https://
communications relating to the
www.cboe.org/legal), at the Exchange’s
proposed rule change between the
Commission and any person, other than Office of the Secretary, and at the
Commission.
those that may be withheld from the
public in accordance with the
II. Self-Regulatory Organization’s
provisions of 5 U.S.C. 552, will be
Statement of the Purpose of, and
available for Web site viewing and
Statutory Basis for, the Proposed Rule
printing in the Commission’s Public
Change
Reference Room, 100 F Street, NE.,
In its filing with the Commission, the
Washington, DC 20549, on official
self-regulatory organization included
business days between the hours of
statements concerning the purpose of
10 a.m. and 3 p.m. Copies of the filing
and basis for the proposed rule change
also will be available for inspection and
and discussed any comments it received
copying at the principal office of the
on the proposed rule change. The text
Exchange. All comments received will
of those statements may be examined at
be posted without change; the
the places specified in Item IV below.
Commission does not edit personal
The Exchange has prepared summaries,
identifying information from
set forth in sections A, B, and C below,
submissions. You should submit only
information that you wish to make
15 17 CFR 200.30–3(a)(12).
available publicly. All submissions
1 15 U.S.C. 78s(b)(1).
should refer to File Number SR–BX–
2 17 CFR 240.19b–4.
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Paper Comments
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1. Purpose
The Exchange currently waives the
$.18 per contract transaction fee for
public customer (‘‘C’’ origin code)
orders in options on Standard & Poor’s
Depositary Receipts (‘‘SPY options’’)
that are executed in open outcry or in
the Automated Improvement
Mechanism (‘‘AIM’’) 3. This fee waiver
is due to expire on September 30, 2011.
The Exchange proposes to extend the
fee waiver through December 31, 2011.4
The Exchange also proposes to extend
the fee waiver to options on the
Financial Select Sector SPDR Fund
(‘‘XLF options’’),5 which is currently
traded on the Exchange. The proposed
fee waiver is intended to attract more
customer volume on the Exchange in
these products. For competitive reasons,
the customer base for open outcry and
AIM trading in SPY and XLF options
appears more sensitive to fees than the
customer base for such trading in other
exchange-traded funds (‘‘ETFs’’). The
Exchange believes that waiving the
transaction fee for such customer trades
in SPY and XLF options will encourage
greater customer trading in these
products. The increased volume and
liquidity resulting from greater customer
trading in SPY and XLF options will
benefit all market participants trading in
these products. The Exchange would
also like to encourage use of open
3 See Securities Exchange Act Release No. 34–
62902 (September 14, 2010), 75 FR 57313
(September 20, 2010), Securities Exchange Act
Release No. 34–63422 (December 3, 2010), 75 FR
76770 (December 9, 2010), Securities Exchange Act
Release No. 34–64197 (April 6, 2011), 76 FR 20390
(April 12, 2011), Securities Exchange Act Release
No. 34–64817 (July 6, 2011), 76 FR 40948 (July 12,
2011) and CBOE Fees Schedule, footnote 8. AIM is
an electronic auction system that exposes certain
orders electronically in an auction to provide such
orders with the opportunity to receive an execution
at an improved price. AIM is governed by CBOE
Rule 6.74A.
4 The Exchange notes that transaction fees are
also currently waived for customer orders of 99
contracts or less in ETF (including SPY and XLF
options), ETN and HOLDRs options. See CBOE Fees
Schedule, footnote 9.
5 XLF seeks to provide investment results that
correspond to the price and yield performance of
the Financial Select Sector of the S&P 500 Index
(the ‘‘Index’’). The Index includes companies from
industries, such as diversified financial services,
insurance, commercial banks, capital markets, real
estate investment trusts, consumer finance, thrifts
and mortgage finance, and real estate management
and development. XLF utilizes a passive or
indexing investment approach to attempt to
approximate the investment performance of the
Index.
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]]>Agencies
[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Notices]
[Pages 63969-63971]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26528]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65514; File No. SR-BX-2011-066]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Inbound Routing from an Affiliated Exchange
October 7, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on September 30, 2011, NASDAQ OMX BX, Inc. (``Exchange'' or
``BX'') filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III, below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
BX is filing with the Commission a proposed rule change to permit
it to accept inbound orders routed by Nasdaq Execution Services LLC
(``NES'') from the NASDAQ OMX PSX facility (``PSX'') of NASDAQ OMX PHLX
(``PHLX'') (with the attendant obligations and conditions), as
described further below, on a one year pilot basis.
The text of the proposed rule change is available at https://nasdaqomxbx.cchwallstreet.com/, at BX's principal office, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In conjunction with a proposal by PHLX to provide outbound routing
services to all markets using its affiliated routing broker, NES,\3\
the Exchange proposes that NES be permitted to route orders from PSX to
the Exchange on a one year pilot basis.
---------------------------------------------------------------------------
\3\ See SR-Phlx-2011-108.
---------------------------------------------------------------------------
NES is a broker-dealer and member of NASDAQ, PHLX and the Exchange.
NES provides all routing functions for The NASDAQ Stock Market
(``NASDAQ'') as well as, pursuant to recent proposed rule changes, BX
and PHLX.\4\ The
[[Page 63970]]
Exchange, NASDAQ, PHLX and NES are affiliates. Accordingly, the
affiliate relationship between BX and NES, its member, raises the issue
of an exchange's affiliation with a member of such exchange.
Specifically, in connection with prior filings, the Commission has
expressed concern that the affiliation of an exchange with one of its
members raises the potential for unfair competitive advantage and
potential conflicts of interest between an exchange's self-regulatory
obligations and its commercial interests.\5\
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\4\ See SR-BX-2011-048 and SR-Phlx-2011-108.
\5\ See Securities Exchange Act Release Nos. 59153 (December 23,
2008), 73 FR 80485 (SR-NASDAQ-2008-098); and 62736 (August 17,
2010), 75 FR 51861 (August 23, 2010) (SR-NASDAQ-2010-100).
---------------------------------------------------------------------------
Recognizing that the Commission has previously expressed concern
regarding the potential for conflicts of interest in instances where a
member firm is affiliated with an exchange of which it is a member, the
Exchange previously proposed, and the Commission approved, limitations
and conditions on NES's affiliation with the Exchange.\6\ Also
recognizing that the Commission has expressed concern regarding the
potential for conflicts of interest in instances where a member firm is
affiliated with an exchange to which it is routing orders, the Exchange
previously proposed, and the Commission approved,\7\ NES's affiliation
with the Exchange to permit the Exchange to accept inbound orders that
NES routes in its capacity as a facility of Nasdaq, subject to the
certain limitations and conditions. The Exchange now proposes to permit
BX to accept inbound orders that NES routes in its capacity as a
facility of PHLX, subject to these same limitations and conditions:
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release Nos. 58324, 73 FR 4936
(August 12, 2008) (SR-BSE-2008-02; SR-BSE-2008-23; SR-BSE-2008-25;
SR-BSECC-2008-01; (``BSE Approval Order'').
\7\ See Securities Exchange Act Release Nos. 59154 (December 23,
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-048); and 64090
(March 17, 2011), 76 FR 16462 (SR-BX-2011-007).
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First, the Exchange and the Financial Industry Regulatory Authority
(``FINRA'') will maintain a Regulatory Contract, as well as an
agreement pursuant to Rule 17d-2 under the Act (``17d-2
Agreement'').\8\ Pursuant to the Regulatory Contract and the 17d-2
Agreement, FINRA will be allocated regulatory responsibilities to
review NES's compliance with certain Exchange rules.\9\ Pursuant to the
Regulatory Contract, however, BX retains ultimate responsibility for
enforcing its rules with respect to NES.
---------------------------------------------------------------------------
\8\ 17 CFR 240.17d-2.
\9\ NES is also subject to independent oversight by FINRA, its
designated examiniing authority, for compliance with financial
responsibility requirements.
---------------------------------------------------------------------------
Second, FINRA will monitor NES for compliance with the Exchange's
trading rules, and will collect and maintain certain related
information.\10\
---------------------------------------------------------------------------
\10\ Pursuant ot the Regulatory Contract, both FINRA and the
Exchange will collect and maintain all alerts, complaints,
investigations and enforcement actions in which NES (in its capacity
as a facility of PHLX routing orders to the Exchange) is identified
as a participant that has potentially violated applciable Commission
or Exchange rules. The Exchange and FINRA will retain these records
in an easily accessible manner in order to facilitate any potential
review conducted by the Commission's Office of Compliance
Inspections and Examinations.
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Third, FINRA will provide a report to the Exchange's chief
regulatory officer (``CRO''), on a quarterly basis, that: (i)
Quantifies all alerts (of which FINRA is aware) that identify NES as a
participant that has potentially violated Commission or Exchange rules,
and (ii) lists all investigations that identify NES as a participant
that has potentially violated Commission or Exchange rules.
Fourth, the Exchange has in place BX Rule 2140(c), which requires
NASDAQ OMX, as the holding company owning both the Exchange and NES, to
establish and maintain procedures and internal controls reasonably
designed to ensure that NES does not develop or implement changes to
its system, based on non-public information obtained regarding planned
changes to the Exchange's systems as a result of its affiliation with
the Exchange, until such information is available generally to
similarly situated Exchange members, in connection with the provision
of inbound order routing to the Exchange.
Fifth, the Exchange proposes that the routing of orders from NES to
the Exchange, in NES's capacity as a facility of PHLX, be authorized
for a pilot period of one year.
The Exchange believes that the above-listed conditions protect the
independence of the Exchange's regulatory responsibility with respect
to NES, and that these mitigate the aforementioned concerns about
potential conflicts of interest and unfair competitive advantage.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\11\ in general, and with
Sections 6(b)(5) of the Act,\12\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest, because the
proposed rule change will allow the Exchange to receive inbound routes
of orders from NES, acting in its capacity as a facility of PHLX, in a
manner consistent with prior approvals and established protections. The
Exchange believes that the proposed conditions establish mechanisms
that protect the independence of the Exchange's regulatory
responsibility with respect to NES, as well as ensure that NES cannot
use any information it may have because of its affiliation with the
Exchange to its advantage.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
BX does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\
thereunder.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of
[[Page 63971]]
the purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-BX-2011-066 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2011-066. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2011-066 and should be
submitted on or before November 4, 2011.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26528 Filed 10-13-11; 8:45 am]
BILLING CODE 8011-01-P
